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Understanding the FAFSA
By Lucy
Lazarony • Bankrate.com
If you think your student's college financial aid
paperwork reads like a Greek 101 exam, you are not alone. Sorting
through the Free Application for Federal Student Aid (FAFSA) form
can be cumbersome, at best and an incomprehensible nightmare at
worst.
If you haven't filed a FAFSA yet -- get on it. This
form must be completed if you want your son or daughter to be eligible
for federal and state aid. A lot of aid is distributed on a first-come,
first-serve basis, so the sooner you file, the better.
After filing you will receive a Student Aid Report
(SAR). Your SAR is also available online at the FAFSA
Web site.
This report summarizes the information submitted on
the FAFSA and lists your expected family contribution (EFC), which
is the amount of money the government expects your family to pay
in college education costs. The EFC is used to determine your student's
eligibility for federal student aid.
Be sure to be sitting down when you open that envelope.
"It's kind of a shock to their system,"
says Ronald Shunk, director of financial aid at Gettysburg College
in Gettysburg, Pa.
Shunk, who has answered parents' questions on USA
Today's Financial Aid Hotline for 10 years, quickly adds, "But
one way or another it seems to work out."
Check your numbers
The first thing to do is make sure the information on the SAR is
complete and correct. In case of an error, resubmit the form to
the central processor as soon as possible. Corrections will go through
in a couple of weeks, and each college that your student applied
to will have access to the updated information.
Folks who estimated their earnings may need to re-submit
the form if their guesses were too far off. A quick glance at your
W-2 form should tell you how close your estimate came. Most folks
shouldn't have a problem.
"For most people these days their last pay stub
shows them how much they've earned, so they're not going to be far
off on an estimate," Shunk says.
Colleges and universities start sending out admission
acceptance letters in March and financial aid award notices come
close behind. Expect a financial aid award letter to arrive within
two weeks of an acceptance letter. Many schools send out acceptance
and aid notifications on the same day.
In a financial aid package a college or university
will try to make up the difference between the cost of attending
their school and a family's expected contribution as spelled out
in a SAR report. Some succeed more than others. Three schools with
similar costs may offer very different financial aid packages.
Much depends on a student's academic credentials,
a family's financial need and how much aid is available from a school.
Private schools tend to have deeper pockets than state schools.Many
middle class families may find themselves in a tough spot. They
have too much money to qualify for need-based aid, but too little
money to cover college costs on their own. So parents or students
-- or both -- take out loans.
"That's the group that ends up borrowing the
most," says Carolyn Shanley, senior writer and public relations
manager for Nellie
Mae, a maker of education loans. "More and more people
are in that situation." Indeed, the College Board estimated
58 percent of the $74 billion in financial aid distributed in the
2001-2002 school year was for loans.
Don't dip into retirement savings
Parents who feel barreled over by their expected family contribution
and the prospect of some heavy education loans for themselves or
their child may be tempted to dip into their retirement savings.
Experts advise against this.
"You can't borrow for retirement. And your child
can borrow for school and have a long time to pay it back,"
Shanley says. "If they're still saving for retirement and still
have a long way to go, they need to make that their No. 1 priority."
A bit of a waiting game goes on during this whole
process. First you wait a few weeks for that SAR to arrive. Then
you wait a few more weeks for those acceptance letters and the financial
aid awards to trickle in.
All candidates should receive an admissions notification
by around April 1 and financial aid packages by mid-April. Most
schools give applicants until May 1 to select a school. Students
should make use of all this down time to seek out and apply for
scholarships.
"There are deadlines for awards every single
month," says Mark Kantrowitz, founder of FinAid, a Web-based
guide to financial aid.
Look for scholarships
Check out individual college Web sites, and search for scholarship
sources on sites such as FastWeb
and the College
Board. Avoid sites that charge you to search for scholarships.
Don't overlook local sources of scholarships. Community-based awards
may be smaller, but they're also easier to win. You can learn about
local competitions at the public library and at the guidance office
at your local high school.
As gifted and talented as your teen may be, not every
student gets that much-sought-after free ride. Experts point out
that while SAR reports may make parents sweat a bit, it's the financial
aid notices that throw some families into an all-out panic.
"The more climactic point is when financial aid
packages start arriving," says Shawn Lindstrom, director of
financial aid and scholarship services at eStudentLoan.com.
"That's when the sticker shock sets in and they start exploring
other avenues. They start calling the school and say, 'How do you
expect me to pay for this?'"
First off, you do have a little bit of leverage if
your teen has been accepted at a number of schools. You may be able
to negotiate a better aid package by mentioning to School A all
that School B is willing to do for you.
"Most aid packages can be negotiated and appealed
if you just take the effort," says Gary Goldberg, president
of College, Financial & Tax Strategies in St. Louis.
It's worth a shot. A calculator
for comparing award letters can be found on the Nellie Mae site.
While cost is certainly not the only factor that families look at
when deciding on colleges, it plays a key role. It may make the
difference when a student is choosing between two schools.
"For a few hundred dollars they're not going
to turn down one school over another," Shunk says. "But
for a few thousand a year they may."
-- Updated: Nov. 20, 2002
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